Nuremberg, Germany  - Bavaria's Christian Social Union (CSU) kicked off a two-day party congress in Nuremberg Friday locked in a tax dispute with its Christian Democratic Union (CDU) ally two months ahead of elections in Germany's largest state.

CSU Chairman Erwin Huber predicted the party, which has held power in the southern state since 1959, would hang on to the overall majority it has maintained since 1962, despite signs the party is losing ground.

Describing the CSU as a values-based party, Huber said it was the only party in a position to continue Bavaria's successful course.

The CSU has backed reversing a cut in the tax allowance granted commuters, while the CDU, headed by Chancellor Angela Merkel, is insisting on awaiting a Constitutional Court ruling on the issue.

At federal level, the two parties have been in electoral alliance since 1950, the CSU restricting its campaigning to Bavaria, while the CDU operates in the rest of Germany.

The main business of the congress, which ends Saturday, is to pass a campaign programme for the state election on September 28.

Recent polls place the CSU on or near 50 per cent, down from the 60 per cent the party secured under long-term premier and party chief Edmund Stoiber in 2003.

The Social Democrats (SPD), who saw scored their worst-ever result in the state in 2003, with just under 20 per cent, have gained some ground, while the Greens are hovering around 10 per cent. (dpa)